Mouse and human epidermal cell cultures and epidermal cell lines are utilized to study mechanisms of epithelial carcinogenesis. Proliferating basal cells are selected by growth in culture medium with reduced concentrations of Ca++. Terminal differentiation is induced by increasing Ca++. Carcinogen exposure to mouse skin in vivo or mouse epidermal cells in culture yields cellular foci which resist Ca++ induced differentiation but are not tumorigenic. Exposure to some transforming retroviruses also imparts resistance to differentiation. Transformed keratinocytes express an altered profile of keratins, the major skin differentiation proteins. To explore altered regulation of specific differentiation proteins during carcinogenesis, keratin genes have been cloned and sequenced and the amino acid sequence of the proteins deduced. Tumor promoters induce terminal differentiation in some basal cells while stimulating proliferation in others. Carcinogen-altered preneoplastic cells are resistant to the differentiation-inducing effects of tumor promoters, a property providing a selective advantage to these cells during promotion. In vivo studies indicate that genotoxic carcinogens, but not tumor promoters, can accelerate malignant conversion of benign lesions.